The assignment is to analyze a case study on ”Australia and New Zealand Banking Group: The Agile Transformation”, by answering the following questions.
- What were Elliott’s motivation to implement the agile transformation at ANZ?
- What were the challenges to ANZ’s culture before Elliott became the CEO? Could the agile transformation address those challenges?
- By May 2019, when ANZ paused the rapid expansion of its agile transformation program, how effectively ANZ implemented the program?
- Should ANZ scale up the agile transformation to the entire organization outside Australia? What should Elliott do to remove obstacles and deliver transformation successfully?
The length of a case study should be between 2,000-3,000 words. Please include all references, if they are used.
Australia And New Zealand Banking Group: The Agile Transformation i1v2e5y5pubs W20016 AUSTRALIA AND NEW ZEALAND BANKING GROUP: THE AGILE TRANSFORMATION1 Wiboon Kittilaksanawong and Teeta Erikate wrote this case solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. This publication may not be transmitted, photocopied, digitized, or otherwise reproduced in any form or by any means without the permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e)
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[email protected]. Copyright © 2020, Ivey Business School Foundation Version: 2020-01-15 In today’s world, the only thing you can really do as a CEO with any lasting impact is the impact you have on the culture. Change is happening fast, if ANZ is going to keep being successful, we have to transform our 180-year-old business.2 Chief Executive Officer (CEO) Shayne Elliott of Australia and New Zealand Banking Group (ANZ) In May 2019, Shayne Elliott, the CEO of ANZ had paused the rapid expansion of its massive agile organizational transformation, trying to improve the existing expansion stage.3 In May 2017, he had taken the bank agile, moving it from the traditional command-and-control, risk-based, and process-driven hierarchy to collaborative teamwork.4 Through the transformation, ANZ would become smaller and more focused on its core competences (see Exhibit 1). The value of employees would no longer rely on technical skills, experience, or seniority, but on growth mindset, adaptability, and ability to lead change. Employee rewards would be based more on collaboration than profitability.5 As authority was delegated to tribes and scrums rather than centralized to divisional managers, ANZ had to ensure that risks were still under control. These decisions came not only from competitive pressures of the disruptive entry of financial technology (fintech) companies but also from a series of internal scandals rooted in ANZ’s long-history culture. 6 Given that many organizations had failed to implement such an extremely complex agile transformation, 7 would this transformation be a solution for ANZ to respond to these external and internal challenges? Given its deeply rooted corporate culture that had existed for over 180 years, how could ANZ be successfully transformed? BANKING SERVICE INDUSTRY IN AUSTRALIA The banking industry was the largest part of the Australian financial system, holding about 55 per cent of its total assets. 8 In 2017, the four largest banks were respectively, Commonwealth Bank of Australia, ANZ, Westpac Banking Corporation, and National Australia Bank Limited.9 These banks and other smaller domestic and foreign banks provided traditional retail banking, business banking, trading in financial and stock markets, insurance, and fund management services, which had resulted in a rapid annual growth of 13 per cent since 1985. 10 The financial services industry was as important as the country’s strategic mining industry, contributing around $130 billion, equivalent to 9 per cent of the annual gross domestic product (GDP), ranking For the exclusive use of S. Ugazio, 2022. This document is authorized for use only by Sabine Ugazio in 2022. mailto:
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[email protected] Page 2 9B20M006 the largest industry in the country. The industry also paid the most income tax of about $18 billion and employed more than 400,000 workers, equivalent to 4 per cent of the total employment.11 Financial regulations were divided between the Australian Prudential Regulatory Authority (APRA) and the Australian Securities and Investment Commission (ASIC), while the Australian Securities Exchange (ASE) regulated market conduct. In 1990, the government adopted the “four pillars” policy to maintain the separation of the four largest banks, rejecting any mergers and acquisitions between them. After the global financial crisis of 2007-2008, the Australian financial system had been reformed to provide consumers with more protection, improve the accountability of providers, strengthen protections from product development to distribution, boost competition, and enhance ASIC’s power in protecting consumers. 12 Powerful Reshaping Forces The Australian banking sector had entered a state of flux since 2016 with competition from both startup and established rivals that disrupted the industry by introducing financial technologies, such as online banking and trading, smartphones, mobile apps, cryptocurrencies, and social media. To create shareholder value, banks had to be more flexible and responsive and become more deeply connected to customers. At least six forces were reshaping the industry, including changes in demographics, consumer behaviour, technology, a subdued macro economy, the ongoing Asiafication of Australia, and interventionist governments.13 The population’s median age had been increasing, and people were more urbanized, affluent, and diverse. They were more widely connected across national boundaries. The consumers for wealth and banking products were more globally oriented and more educated, disciplined, and law-abiding. They did more business online and communicated over multiple social media and were therefore more confident in identifying the best financial product offerings from around the world. This consumption trend might be both a threat and an opportunity for traditional banks that had to redefine their relationships with existing customers. This trend was enhanced by more open, modular, and capable information systems that allowed banks to leverage data, analytics, and communications to deliver better value propositions to individual and corporate consumers at larger scales and faster speeds. This capability would provide competitive opportunities to existing and future competitors that were able to offer more differentiated and personalized services. The domestic and global economies, however, were more characterized by slower productivity growth, environmental constraints, deleveraging, and financial repression, which were exacerbated by political uncertainties. 14 Asia—particularly China—had become more influential economically, socially, and culturally. Australian bankers needed to become more familiar with Asian languages, currencies, cultures, norms, and national values and beliefs. In response, governments, regulators, and central banks were reasserting authority not only over the macro economy but also the banking industry. The relationship between banks and governments had thus become a more strategically important issue. AUSTRALIA AND NEW ZEALAND BANKING GROUP History and Background George Kinnear, a Scottish entrepreneur, embarked on a six-month voyage from London to Australia to establish the Bank of Australasia in 1835. The bank survived some of the most difficult economic and social times through its hard-working employees, who created an enduring, growing, and innovative bank. In 1951, it joined Union Bank of Australia to form the ANZ bank and in 1970, merged with English Bank, Scottish Bank, and Australian Bank to become the Australian and New Zealand Banking Group Limited. In 1977, it For the exclusive use of S. Ugazio, 2022. This document is authorized for use only by Sabine Ugazio in 2022. https://employment.11 Page 3 9B20M006 was listed in the Australian Security Exchange (ASX). During the 20th century, it underwent several mergers and acquisitions. In 2003, ANZ acquired the National Bank of New Zealand and in 2012, integrated its systems and brands to strengthen ANZ’s presence in the second major domestic market.15 Since 2007, with the rise of the Asian economy and the growing connectivity among Australia, New Zealand, and Asia Pacific, ANZ had transformed to become a regional bank with global quality. Headquartered in Melbourne, it was one of the largest international banks in Australia and New Zealand with a market capitalization of A$86.9 billion and total assets of A$897 billion in 2017.16 With over 50,000 employees, ANZ provided a broad range of banking and financial products and services, serving more than 10 million customers in 34 countries through a network of over 1,200 branches around the world (see Exhibit 2).17 Elliott succeeded Mike Smith as CEO of ANZ in January 2016. Joining ANZ in 2009, Elliott had served as CEO of Institutional Bank and as chief financial officer. With over 30 years of experience in banking in Australia and overseas, Elliott was appointed to achieve ANZ’s priorities in building a better capitalized and balanced bank that would deliver stronger outcomes to shareholders, employees, customers, and communities.18 The appointment of Elliott also marked a new era for ANZ—a 180-year-old conservative bank—to become an aggressive financial institution through an agile transformation. Leadership under Mike Smith (2007–2015) Prior to joining ANZ in 2007, Smith had worked at HSBC Bank plc for three decades and led its Asian operations. As a banker with global perspective,19 he was a highly paid CEO in Australian banking history. However, he could not fulfil his super-regional strategy for ANZ in Asia. ANZ’s market value fell six per cent, while shareholder returns were the worst among the Big Four banks (see Exhibits 3.1 and 3.2). Given that other Australian banks had only a symbolic presence in the regions, Smith’s highly ambitious target was to achieve 20 per cent of ANZ’s revenue from the Asia Pacific, Europe, and America. As a result, he increased the number of employees by 10 times to 700, with most based in China.20 Smith frequently criticized politicians, whom